Revolutionizing Retail With Smart Pricing and Promotion

CIOs are navigating the growing complexity of available technology as they integrate smart pricing and promotion solutions with existing technology and platforms.
CIOs are looking to set clear expectations around how advanced analytics technology can enhance decision-making and optimize pricing and promotions with the data sources available to the organization.
CIOs are balancing the need for new technology and the cost of implementing it with the expected return on investment.

Our Advice

Critical Insight

CIOs need to be the champions of smart pricing and promotion technology as it empowers organizations to drive increased revenue potential through advanced analytics and automation. Additionally, this technology helps retailers stay ahead of customer trends, fostering increased customer retention.

Impact and Result

Improve your pricing and promotion strategy by using this research to understand how smart pricing and promotion can help your organization’s success.
Use our tools to evaluate the current state of your data and software tools to help you be competitive.
Adopt a unified pricing and promotion strategy that consumes data considers supply chain, consumer trends and market changes.

Revolutionizing Retail With Smart Pricing and Promotion Research & Tools

1. Revolutionizing Retail With Smart Pricing and Promotion Storyboard – A detailed guide to how smart pricing and promotion software can improve revenue and customer experience.

CIOs are in a unique position to help their organizations adopt smart pricing and promotion technology.

2. Data Assessment Smart Pricing and Promotion Tool – A tool to assess the data points needed for a smart pricing and promotion solution.

This tool is used to help CIOs identify the data and useability in integrating into a smart pricing and promotion solution.

Revolutionizing Retail With Smart Pricing and Promotion

Unlock your full growth potential.

Analyst perspective

Smart pricing and promotion to improve revenue

As data-driven strategies are increasingly evolving, smart pricing and promotion solutions for the retail industry have emerged, giving organizations tools for maximizing revenue, optimizing operations and improving the customer experience. Smart pricing and promotion solutions enable organizations to analyze real-time data and, using advanced AI modeling, provide the business team the ability to elevate their pricing strategies. Not only do smart pricing and promotions solutions elevate an organization’s pricing strategy, their AI engine and data outputs can be integrated and used to inform a variety of business operations including distribution planning and allocations. For technology leaders, smart pricing and promotion solutions offer a distinct opportunity to position their organizations for a competitive advantage and sustainable growth.

Donnafay MacDonald

Research Director, Industry
Info-Tech Research Group

Executive summary

Your Challenge

Navigating the growing complexity of available technology as you integrate smart pricing and promotion solutions with existing technology and platforms.

You need to set clear expectations around how advanced analytics technology can enhance decision-making and optimize pricing and promotions with the data sources available to the organization.

You need to balance the need for new technology and the cost of implementing it with the expected return on investment.

Common Obstacles

Support for building a robust pricing and promotion strategy that uses essential data needed for decision-making.

The business is using Excel to collate their data for decision-making using siloed and fragmented data.

You are thoroughly evaluating the existing technology stack to understand capabilities and limitations and enable the most effective technology solutions.

Info-Tech’s Approach

Info-Tech will provide insight and tools into how to:

Improve your pricing and promotion strategy by using this research to understand how smart pricing and promotion can help your organization’s success.

Use our tools to evaluate the current state of your data to support a smart pricing and promotion solution.

Adopt a unified pricing and promotion strategy that considers supply chain, consumer trends, and market changes.

Info-Tech Insight

Right pricing is the cornerstone of success

Poor pricing leads to failure

47%

of products fail in the pricing stage.

Pricing research is highly valued

90%

of companies highly value pricing research.

Source: Hanover Research, 2023

“90% of online shoppers say they actively compare deals before making a purchase. 60% of shoppers say that pricing is the key factor when making a purchasing decision. And nearly 50% of consumers only purchase discounted products.”

Source: Prisnyc, 2024.

A successful marketing strategy has a robust price and promotion strategy

Every successful marketing strategy includes five core elements: product, place, price and promotion are the first four elements, with people (consumers) being the end focus.

Together these four elements deliver value to customers. This research piece focuses on price and promotion strategy, which plays an instrumental role in determining a product’s market success.

A good price and promotion strategy will do the following:

Shape the perceived value of products/services.
Drive awareness and engagement with customers.
Provide product differentiation in a crowded market.
Build customer loyalty.

“How much the customer is willing to pay for the product has very little to do with the seller’s cost and has very much to do with how much they value the product or service they’re buying. When considering your price, it’s important to realize that it’s not for yourself, but for your target customers.”

–Eric Dolansky, Associate Professor of Marketing, Brock University, quoted in BDC, 2024.

Increase revenue generation with smart pricing & promotion

Smart pricing and promotion leverages real-time data from multiple sources which is consumed by an artificial intelligence (AI)/machine learning (ML) engine to generate dynamic, data-driven insights. This allows for adaptive pricing strategies to be employed and gives retailers the ability to instantly respond to shifts in market conditions, competitor pressures, customer behavior, and inventory levels. The engine that drives insights is continually optimized, allowing for on-the-fly price and promotion adjustments. The overall value outcomes of smart pricing and promotion include:

Increased revenue and profitability.
Improved customer engagement, customer experience and retention.
Enhanced operational efficiency.
Higher adaptability to change, increasing competitive advantage.

“Dynamic pricing isn't just about adjusting prices — it's about seizing opportunities to maximize revenue and profit in real-time.”

Source: Simon-Kucher, 2024

Accelerate retail performance with the adoption of cutting-edge analytics models

The path to growth is by adopting AI/ML technology for insights and decision-making, where retailers who use AI/ML see higher growth in both sales and profits over their competitors who do not use AI/ML.

Impact of AI and ML use on retail performance in 2022 and 2023. Retailers who adopted AI saw a 13.4% Sales growth and 8.2% profit growth, compared to those who did not adopt who only saw a 6.3% sales growth and 4.1% profit growth.

Retailers using artificial intelligence (AI) and machine learning (ML) technologies performed better than their competitors. Both in 2023 and 2024, retail companies using this kind of technology saw a two-digit percentage growth of their sales compared to the respective previous years. Similarly, their annual profit grew by roughly eight percent, outperforming retailers who did not use AI or ML solutions.

Source: Statista, 2023.

Competitive retailers are benefiting from smart pricing and promotion strategies

Using AI technologies for pricing and promotion is critical for retailers to:

Gain a competitive advantage by being able to synthesize large amounts of data and leveraging advanced technologies to derive insights that better position products within the market.
Integrate across business functions and identify real-time pricing and promotion decisions that are necessary to satisfy customer demand, manage stock position, and maximize profits.
Invest early to achieve higher return on investment (ROI) as margin pressures continue to increase and AI continues to advance.

Percent of retailers who are benefiting from an AI-based pricing solution. 70% reported high level of benefit.

Business KPIs are directly impacted by pricing and promotion strategies

Smart Pricing & Promotion Strategy

Sales per Square Foot (SPF)
Measures the efficiency of the available space within a physical store. Business Value: Indicator of a location's performance & profitability.
Drivers to increase: Optimized pricing/promotions, product offering, effective merchandising and store layouts that encourage dwell times.
Conversion Rate
Measures number of customers who visit the store/website and make a purchase. Business Value: Indicator of meeting customer needs & expectations
Drivers to increase: Personalizations, staff likeability, pleasing designs (product, store & website layouts)
Average Transaction Value (ATV)
Measures the average customers are spending with each purchase. Business Value: Evaluate sales initiatives & effectiveness of pricing/promotion strategy
Drivers to increase: Special offers, product bundling, checkout flow
Units per Transaction (UPT)
Measures the average number of items purchased per transaction. Business Value: Indicator of sales revenue and profitability
Drivers to increase: Promotions, upselling, cross-selling & merchandising
Sell-Through Rate
Measures the product sold vs. the beginning on-hand product for the selling period. Business Value: Indicator of market demand, seasonality and product preferences.
Drivers to increase: Change to price/promotion strategy, merchandising adjustment
Turnover Rate
Measures the cost of goods sold by the average cost of inventory of a set time period. Business Value: Indicator of product performance, profitability and market trends.
Drivers to increase: Effective inventory management systems, change to overall marketing strategy, merchandising adjustment
Gross Margin ROI
Measures the gross profitability of owned inventory. Business Value: Key indicator of profitability and viability of products.
Drivers to increase: Optimize price and promotions, employ smart technologies for inventory management, improve forecast accuracy.
Gross Profit Margin
Measures the efficiency of revenue generation of products/services sold. Business Value: Indicator of product efficiency and used to set pricing strategy.
Drivers to increase: Change to pricing and product strategy.
Net Profit Margin
Measures the overall profitability of goods/services sold. Business Value: Indicator of overall financial health and informs marketing strategy.
Drivers to increase: Increase sales through optimized pricing strategy, reducing expenses through vendor relationships, expansion to capitalize on economies of scale.
Customer Retention
Measures the ability to keep customers and convert them into repeat buyers. Business Value: Overarching KPI in introducing a smart pricing and promotion strategy by driving brand loyalty.
Drivers to increase: Using smart pricing and promotion software; build customer habits through personalization, maximize communication, provide quality customer experiences.

NOTE: Not an exhaustive list of KPIs

Performance metrics must reflect your goals

Metric	Description	Specific	Measurable	Achievable	Relevant	Time-bound
Inventory turnover ratio	Measures how often inventory turns to track how well you are capitalizing on market demand	Implement a data-driven pricing strategy to influence how quickly product sells	As a ratio, total cost of inventory sold/average inventory sold	Increase/decrease over/under stock by 20%	Reduce overstock/understock, free up capital and storage, and capitalize on market demand	Achieve improved inventory performance within 12 months
Conversion rate	Number of customers converted in-store and online from visitor to purchaser	Implement a data-driven pricing strategy focused on personalization to increase conversion	As a percentage, the number of purchasers/number of visitors	Increase overall conversion rates by 15%	Increasing conversion rates increases sales, maximizes impact of pricing strategies	Achieve improved conversion rates within six months
Physical/digital traffic	Number of customers who visit physical stores and/or digital stores	Implement a data-driven pricing strategy with targeted promotions	The total number of visits either in-store or digital	Increase physical store traffic by 10% and digital by 20%	Increase the amount of traffic across all channels, supports sales growth	Achieve improved traffic within six months
Average transaction value (ATV)	Increase the average transaction value per customer transaction	Implement a targeted pricing strategy to increase overall units on every transaction	As a percentage, total sales/total transaction count	Increase average transaction value per customer by 10%	Increasing the ATV contributes to revenue growth	Achieve improved average transaction value within six months
Sales per square foot	Increase sales by square foot of a physical store	Implement a data-driven pricing strategy with targeted in-store promotions	As a percentage, total net sales/total square feet of the physical store	Increase sales per square foot by 12%	Increasing sales per square foot improves the effectiveness of the retail space	Achieve improved sales per square foot within nine months
Customer retention	Repeat buying from the same customer	Implement personalized, loyalty-based pricing and promotions, increasing repeat buying	As a percentage, total customer - new customers/total customers	Increase customer retention by 15%	Increasing customer retention is less costly than finding new customers	Achieve improved customer retention within 12 months
Gross margin return on investment (GMROI)	Profit return for every dollar invested in inventory	Implement a data-driven pricing strategy to improve overall GMROI	Total gross profit/average inventory cost	Improve GMROI by 5%	Increase GMROI helps retailers maximize profit by generating a higher return on inventory investment	Achieve improved GMROI within nine months

AI-powered pricing capabilities outperforms all other pricing strategies

Measurable impact of smart pricing and promotion technology

	Experience-Based	Rule-Based	Analytics-Enabled	AI-Powered
Inputs	Pricing strategy is not clear Prices are set on gut instinct Basic tools and reporting	Pricing strategy is high-level Prices are determined by a single factor Excel is the usual reporting tool	Pricing strategy considers economic and customer data points Prices are determined with more than one factor Advanced data analytics tools are used Consistency and alignment through a unified pricing team	Pricing strategy uses AI models which consume a wide range of strategic data points Dynamic pricing and promotion are achieved Fully integrated solution includes all needed tools and reporting Dedicated data science team
Outputs	Baseline customer perception Baseline gross profit Baseline revenue	One-off revenue increase +1% - 2% One-off gross profit increase +1% - 2% N/A	Sustained revenue increase +2% - 3% Sustained gross profit increase +2% - 3% N/A	Sustained revenue increase +2%-5% Sustained gross profit increase +5%-10% Sustained customer perception +10%

Source: BCG, 2024

Dynamic pricing directly correlates to revenue potential

Adapting price to market fluctuations increases profits

Static pricing versus Dynamic pricing. Static pricing has one price point, while dynamic using AI to create multiple price points.

Source: Bright Pearl, 2023

AI changes not only the way retailers make decisions but also the quality and range of those decisions.

Source: BCG, 2024

Build a robust data foundation for success

Five steps to create a robust data foundation; 1 - Determine what options are available to integrate internal and external data into a solution along with timing. 2 - Determine availability and useability of existing data to integrate. Validate the quality and integrity of the data to be consumed. 3 - Establish data governance, standardize the data, and implement security measures. 4 - Leverage advanced analytics, and continuously monitor and refine models to stay relevant and effective. 5 - Beyond pricing and promotion, determine how outputs can be leveraged across the organization to feed back into existing applications.

Activity: Data Quality Assessment

60-90 minutes

The Data Assessment Smart Pricing and Promotion tool is to be used to guide retailers in understanding the data points needed to support a comprehensive smart pricing and promotion solution.

The workbook contains five worksheets:

Instructions
Terminology and Definitions (used in the Data Quality Assessment tab)
Data Quality Assessment
Data Quality Visual Output
Data Quality Go/No-Go

The tool is directional where not all data points are required and/or not all source systems are used by retailers.